From Prudential Sec. Equity Research:
TELECOMMUNICATIONS/WIRELESS & WIRELINE EQUIPMENT: Metro DWDM will be a topic of
significant interest at next month's SuperCom, but we remain conservative in our
outlook on the pace at which this new market opportunity will unfold. Within the
next 2 weeks, we expect several vendors to announce Metro DWDM products and initial
field trials. This market is beginning to pick up steam as several vendors have now
entered the fray, including Ciena, Tellabs, Nortel, Fujitsu, Lucent, Alcatel,
Ericsson, and others. The use of DWDM in Metro applications promises to
significantly increase the bandwidth in the local loop. However, the very last mile
connection, which typically means from a fiber node to the customer premise, remains
bandwidth constrained. While several DSL and fiber-to-the-curb (FTTC) strategies
have been proposed to eliminate this bottleneck, nothing has been deployed broad
scale at this point. Since most end-users still don't have broadband access, the
obvious question is, why do carriers need the additional inter-office and intra-loop
bandwidth that Metro DWDM can provide? This question, together with the relatively
high initial cost of Metro systems, leads us to question what incentive carriers
will have to deploy Metro DWDM until the last mile of the network is actually
upgraded to broadband capability. That's not to say that Metro DWDM systems will
not be deployed in the coming months. In fact, we believe that select CLECs will
find this technology useful in expanding their limited fiber resources. However,
the significant opportunity for Metro DWDM remains with the RBOCs, and in our view,
this is likely to remain a "potential" opportunity well into next year. (John H.
Butler)
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